EverQuote Receives Buy Rating from B.Riley Financial with $36.00 Price Target

B.Riley Financial reaffirmed their Buy rating on EverQuote with a price target of $36.00, while Craig-Hallum's Jason Kreyer also gave a Buy rating. Oppenheimer maintained a Hold rating. EverQuote's market cap is $871.4M with a P/E ratio of 23.42.

Title: EverQuote's Diversification Strategy: A Path to Sustainable Growth

EverQuote (NASDAQ:EVER) has been a standout performer in the insurance technology sector, driven by its proprietary system and data-driven approach. The company's impressive growth, particularly in the car insurance market, has been notable, but recent financial results underscore the need for diversification to sustain momentum. B.Riley Financial and Craig-Hallum's Jason Kreyer have both reaffirmed their Buy ratings on EverQuote, with a price target of $36.00, while Oppenheimer maintained a Hold rating.

In Q1 2025, EverQuote reported a significant 83% year-over-year (YoY) increase in total revenue to $166.6 million, marking the fourth consecutive quarter of record-breaking revenue. This growth was accompanied by a record EBITDA of $17.1 million, a substantial improvement from $3 million a year ago. The company's technological advantage, including its sophisticated bidding engines and AI-powered solutions, has been a key driver of this performance. However, the dominance of the auto insurance market and a few large customers has made the company vulnerable to market trends [1].

EverQuote's margins finally turned positive in the past few quarters, with a close to 100% gross margin. However, the company's high business concentration in the auto insurance market, which accounts for 90% of its revenue, poses risks. The cyclical nature of the P&C market and regulatory changes in third-party media sources could impact the company's ability to acquire traffic efficiently [1].

To mitigate these risks, EverQuote is pursuing diversification into other verticals such as home, renters, and a "one-stop shop" for local insurance agents. The company aims to enter these markets with only a modest increase in headcount, leveraging its existing network of over 175 insurance carriers and 6000 independent agents. This expansion is crucial given the tepid recovery in the overall P&C market and the potential for regulatory changes to impact EverQuote's business model [1].

The company's competitive advantage lies in its ability to leverage a decade of consumer data points to refine its matching algorithms and personalize the insurance shopping experience. This edge has been instrumental in delivering higher-performing referrals, making EverQuote an attractive partner for insurance providers. Management has noted that the adoption of "Smart Campaigns," a machine learning-based product, has improved carriers' campaign performance by over 40% [1].

EverQuote's financial performance has been impressive, with a triple-digit return in its peer group over the past three years. However, its enterprise value-to-sales (EV/Sales) ratio of 1.4x is in the middle range compared to its peers, suggesting potential for upside as it diversifies its revenue streams [1].

Risks to EverQuote's thesis include the general declining activities of the auto insurance industry and the speed of its diversification efforts. However, the company's strong performance in the auto insurance market and its operational prowess suggest that it can expand into new verticals without significantly impacting its bottom line [1].

Management has provided optimistic guidance for Q2 2025, projecting revenue between $155 million and $160 million, with adjusted EBITDA between $20 million and $22 million. Given the upward revisions in earnings estimates, there is potential for another upside surprise [1].

In conclusion, EverQuote's diversification strategy is a strategic move to sustain its growth momentum and mitigate risks associated with market concentration. The company's technological advantage and operational prowess position it well for success in new verticals. Investors should monitor the company's progress in diversification and its ability to navigate regulatory changes.

References:
[1] https://seekingalpha.com/article/4808022-everquote-diversification-could-provide-more-upside